This Is One “Crazy, Nastyass” Stock Market! Here’s Why

The stock market is surging again to new highs and I’m asking myself, “who the hell is buying right now? Are investors insane?”

fundamentals are deteriorating;

technically stocks remain in an uptrend but there are red flags (divergences) everywhere;

greed is off the charts; and

the macro/structural backdrop is no longer supportive of risk taking.

Still investors just can’t seem to keep their “extreme greed” in check and the divide between price and reality is getting more massive every day.

The above are edited excerpts from an article* by Jesse Felder (thefelderreport.com) entitled The “Honey Badger” Stock Market.

The following article is presented by Lorimer Wilson, editor ofwww.munKNEE.com (Your Key to Making Money!), www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the FREEMarket Intelligence Report newsletter (register here; sample here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.

Felder goes on to say in further edited excerpts:

It seems the only reason to buy stocks right now is because others are buying (the trend remains in place) which is fine. As always, this works until it doesn’t. Trend following is a valid investment process but don’t delude yourself into thinking there is any other reason to buy right now – and the longer this goes on, buying only because others are buying, the more painful the reckoning will be.

Wall Street insiders understand this all too well. That’s why they’re all lining up to sound the alarm. The Fed gets it, too, and they’re also openly expressing their worries. Still, investors clearly don’t give a s*** as they continue to pour money into the market.

Oh, you don’t buy the idea that Joe Retail is in the market? Then how to you explain the fact that only one point in the past 75 years has seen retail investors hold a larger allocation to the stock market? (Coincidentally, stocks have only been this overvalued once during that span, as well.)

The fact is, investors have never embraced risk to the degree that they are doing today, rightnow and they’re doing it by buying leveraged ETFs and Junk Bonds like there’s no tomorrow.Problem is there is a tomorrow – and when investors try to get out of these things they’re going to realize that they took on WAY more risk than they ever imagined when they first bought them.

The great irony is they are once again doing all of this at exactly the wrong time.

The economy contracted in Q1,

The corporate profits bubble could finally be bursting.

Margins declined in the first three months of the year,

All that cash on corporate balance sheets that the bulls keep talking about (and which Stephanie Pomboy reminds us resides at only a handful of firms, anyway) actually contracted, as well.

To top it off the Fed is tightening! Yes, tapering = tightening – and if QE was bullish then the removal of QE is bearish. Period.

…Call it a blowoff. Call it a Wile E. Coyote moment. Call it a divergence. Call it a disconnect. Call it a lapse of judgement. Call it whatever you want.

I’ll call the “Honey Badger” market because:

This is one “crazy, nastyass” stock market – and I can’t believe I’m watching it happen all over again.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

Greed may have been good for Gordon Gekko. but in the investment world it rarely is. As Warren Buffett is famous for saying “…be fearful when others are greedy and greedy when others are fearful” [and now is such a time]…to start showing some level of fear here in the face of extreme greed by the crowd. The crowd can be right for a long time, but they are rarely right at extremes. While this time may be different, the probabilities suggest that at the very least it will be a more difficult environment for equities going forward.

The 4 fundamentals and technicals discussed in this article accurately called stock market crashes in 2000 and 2007 and these same market metrics are again TODAY warning that a possible financial tsunami is brewing on the horizon. No one knows for certain WHEN the tsunami will hit Wall Street…but, without question, today’s stocks exhibit extremely exaggerated valuations, and extremes never last, so make no mistake, a major stock sell-off looms.

For US stocks — and by implication most other equity markets — the danger signals are piling up to the point where a case can be made that the end is, at last, near. Take a look at these examples of indicators that should scare the hell out of anyone with a big stock portfolio.

Market historians will recall the term “Nifty 50” originated in the 1960’s bull market to describe 50 wildly popular large-cap stocks at the time. Interestingly, some of the same names from that list are leading the market higher today. The question for investors, of course, is what this selective advance means for the markets going forward.

Are we in the third phase of a bull market? Most who will read this article will immediately say “no” but isn’t that what was always believed during the “mania” phase of every previous bull market cycle? With the current bull market now stretching into its sixth year; it seems appropriate to review the three very distinct phases of historical bull market cycles. Read More »

I’d argue that the record low volume shows investors aren’t looking ahead as much as looking behind and reminiscing at how good things have been over the past five years or so. They’re expecting more of the same even though it’s mathematically impossible people. Read More »

When Staple sector (i.e. defensive) stocks started to reflect greater relative strength than Discretionary sector stocks back in 2000 and again in 2007, the S&P 500 began to fall dramatically in the ensuing months. That’s happening again. Can a collapse of the S&P 500 be far behind? Read More »

The health of a market is best assessed along three vectors: fundamentals, technicals (price action) and sentiment and this is what each is saying about the health of the markets these days. Read More »

For today’s seriously overextended and overvalued US stock markets the best-case scenario is a full-blown correction approaching 20% emerging soon while the worst case is a new cyclical bear market that ultimately leads to catastrophic 50% losses. Read More »

It doesn’t matter until it matters! IF margin debt should start decreasing swiftly, history would suggest something different is taking place in the mind of aggressive investors. Will a decline in margin debt from all-time highs matter this time? Read More »

In the midst of all the optimism we see towards key stock indices these days, there are two leading indicators that are flashing warning signals. They say, “Be careful, and don’t get caught up in the euphoria.” Read More »

No stock can resist gravity forever. What goes up must eventually come down. This is especially true for stock prices that become grotesquely distorted. We have been – and still are – living in another dotcom bubble, and – like the last one – it is inevitable that it is going to burst. Read More »

It’s frustrating to see key stock indices keep pushing higher when historically proven market indicators are all warning of a crash ahead. Irrationality is exuberant to say the very least, and that’s why I believe this rally is counting its last days. Read More »

One comment

One only needs to compare tour current situation to that of only a few years ago to realize that financially things have gotten worse for more the majority of Americans which ultimately determine the health of the US economy.

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